Asylum economics

US immigration plan slows brain drain at a price

New plans to reform US immigration could slow the brain drain, but would cost money. A bipartisan group of senators wants to provide illegal immigrants a path to citizenship, but also to keep more of them out. Meanwhile, innovation-dependent companies will applaud measures to retain more foreign-born graduates in the United States, while small firms may struggle with increased red tape. Fixes like these are needed, but economically they are a mixed bag.

The proposals would create a process for unauthorised but otherwise upstanding immigrants to apply for citizenship after paying a fine and back taxes. This would help address a big immediate problem - the estimated 11 million illegal immigrants living in limbo. And in the longer run, the beneficiaries could set down roots and invest in their families’ education and skills, boosting the US economy. New immigrants also tend to form new businesses at a 30 per cent higher rate than non-immigrants do, according to a 2008 Small Business Administration analysis.

But most undocumented workers have relatively low skills and income, and there’s some evidence that in the short term, as newly minted citizens, they could cost employers more, do existing citizens’ jobs for less, or both. And for smaller companies, new requirements to verify employees’ immigration status could be expensive and even deter them from hiring.

Moreover, the quid pro quo for this amnesty - the imposition of stricter border controls and surveillance - would cost the federal government money. A Congressional Budget Office analysis of a similar legislative effort in 2007 that ultimately failed calculated the incremental cost of amnesty and stricter enforcement at $18 billion over the first 10 years, and several billion annually thereafter.

The plan’s most clearly beneficial measures are probably those that would allow foreign graduates with advanced degrees from US universities to stay in the country. Technology companies complain that they aren’t able to hire enough of these folks. Handing more of them green cards should address that and help keep American companies at the global cutting edge.

The proposals in Congress would also tie future immigration to economic factors like skill gaps and unemployment rates. Done right, that could make for better labour market efficiency. The package might not move markets or the economy in the short term, but it could improve the prospects for both immigrants and the US economy in the future.